Thursday, July 17, 2008


In this silliness linked from naked capitalism people are still assuming a gaussian distribution for stock prices. Still! I can't believe that people keep doing this, after watching that kind of mistake almost take down the financial system. A lot of people made mistaken assumptions about the distribution and independence of mortgage defaults. They assumed that it was impossible for everything to blow up at the same time, but then it did.

Lesson: this stuff happens! A lot!

Learn it already.

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